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Dinesh Narayanan

Mumbai , Dec. 18

INDUSTRIAL Development Bank of India (IDBI) may sell its stake in IDBI Bank Ltd before merging itself with a public sector bank.

Speaking to Business Line on the sidelines of a workshop series on corporate governance organised by Indian Merchant Chamber, Mr M. Damodaran, CMD, IDBI, said, "We are planning to merge IDBI with a large public sector bank. The main criteria for identifying the bank will be the SLR (statutory liquidity ratio) requirement of the combined entity. Our subsidiary, IDBI Bank, does not have enough SLR holdings and we are likely to sell it off. That (selling it off) may bring more value than merging it with IDBI, though that option has not yet been completely ruled out."

Mr Damodaran added that a three-way merger — IDBI, IDBI Bank and a State-owned bank — is unlikely. He, however, declined to give any names of likely candidates.

At today's market price of Rs 41 per share, the value of IDBI's 57 per cent equity holding in the banking arm works out to about Rs 330 crore.

IDBI Bank has an equity capital base of Rs 14 crore.

Mr Damodaran said IDBI would begin rolling out its initiatives the moment its repeal Bill gets the President's seal.

"We are all set to roll-out. As soon as the Bill becomes Act, we will begin the transformation into a universal bank," he said.

The Parliament on Monday approved the IDBI Repeal Bill that would enable conversion of the financial institution into a universal bank. However, according to the provisions of the Bill, the Government's holding in the bank cannot come down below 51 per cent.

A merger with a public sector would ensure that this requirement is fulfilled. Government has also committed a Rs 2,500-crore recapitalisation support spread over five years to the bank.

The first tranche of Rs 770 crore would be released immediately, the Finance Minister had told Parliament. The universal bank will also not be required to maintain the full SLR for five years.

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